PHOENIX — Policy-making out of Washington may be onerous on the hospitality industry, but executives at The Lodging Conference, here at the JW Marriott Phoenix Desert Ridge, aren’t using it as an excuse. Instead, they are absorbing any pain points and trudging forward.
It doesn’t mean it’s been easy. “We set budgets last October before we knew who the president would be,” said David Pepper, chief development officer for Choice Hotels International, and believing that inflation would tamper down. ‘We are still seeing delays in that,” which, he added, has been exacerbated by tariffs. On the bright side, he said that interest rate reductions would give the hotel industry a needed shot in the arm. So far this year, the Fed has issued one rate cut with two more predicted, many believe. Still, “we are now used to it,” Pepper said, noting that construction costs have come down somewhat.
In August, Highside Companies, a development group focused on extended-stay development, secured a $500-million financing package from Apollo to fuel the growth of Everhome Suites, a midscale extended-stay brand of Choice Hotels. Pepper said that Choice is building 20 Everhomes on its own.
Some of that sanguine outlook is shared by Dan Hansen, head of Americas development for Hyatt Hotels Corp. “We started the year with great optimism and there is momentum now,” he said, despite challenges like tariff policy. Hansen, like his peers, said that right now is a great time to build new since supply has been muted for multiple quarters now. Capital to build, both equity and debt, is available, though the latter comes at a still higher cost due to elevated interest rates. Over half of Hyatt’s new signings are in markets where there previously wasn’t a Hyatt brand, Hansen said.
Amit Sripathi, EVP & CDO for Wyndham Hotels & Resorts, recognized some of the challenges put forth by the new administration’s policies, but noted optimism and the resiliency of the hospitality industry, which survived and flourished even after the greatest threat it ever had to confront: the COVID pandemic. “When there is a pullback, we come back and set RevPAR records,” he said. Prior to the conference, Wyndham announced a new brand extension named Dazzler Select by Wyndham, which will target independent hotels in the U.S. considered to be in what Wyndham calls the “lifestyle economy” space.
Wyndham is not the only one with a new brand. Also prior to the conference, Hilton announced the launch of Outset Collection as part of its Lifestyle portfolio. Like Wyndham, it, too, will target U.S. independent hotels. “When we launch a new brand, it’s deliberate,” said Christian Charnaux, EVP & CDO of Hilton, adding that he sees a path to hundreds of hotels joining the collection because of the might of Hilton. “Consumers don’t see a hard or soft brand. They want the assurance of the system.”
IHG Hotels & Resorts has grown of late via acquisition. Earlier this year, it acquired Germany’s Ruby Hotels, a micro-hotel brand. Last month, IHG made the brand available for franchise in the U.S. “2025 started with the idea of propulsion and we are optimistic about Q4 given the swell of activity in [IHG’s] pipeline,” said Kevin Schramm, SVP of essential and suites brand development for America and Canada for IHG Hotels & Resorts.
Optimism might be abounding for brands, but for hotel owners, it’s hard to be anything but pessimistic given the current state. It is something Choice’s Pepper recognizes. “The pain point is operating costs—insurance, property taxes, utilities, labor—owners are squeezed,” he said. On top of that, many hotels that deferred and were allowed PIP (property improvement plan) forbearance in the pall of the pandemic now need soft and hard improvements. The brands are less patient. “A lot of owners need PIPs,” Pepper said.
“If I’m an owner, I look long term,” said Hilton’s Charnaux, likewise agreeing that it’s not getting any easier on the operating side. “Where am I going to get the best returns on capital and flow through to cash-on-cash returns. I’m thinking five to 10 years out.”
At the same time, lodging companies need to grow in order to prop up their stock prices. Most have tried doing this through conversions of independent hotels to their brands or conversions of existing branded hotels when they are for relicensing or sold. Increasingly, Pepper said, brands are volunteering key money to an owner to “make PIP costs more reasonable.” Choice, he said, uses key money on renewals because it wants the upgrades and to lock in the hotel long term.
He had some advice for investors, too. “This is where you go out and buy,” Pepper said. “Interest rates are lower. This is a buy opportunity and to look at repositioning to another brand or upscaling it. At the same time, he noted that now is the chance opportunity to build new considering the muted supply growth of the past three years. “It will open in a couple of years when the market is back,” he said, and potentially be able to refinance at a lower rate. “You’ll be the newest in the market. You need fortitude to build in the downturns.”